PLN Enlists HSBC for Help in Mine-Mouth Coal Plant Projects

State electricity company Perusahaan Listrik Negara has appointed HSBC as a transaction adviser for two mine-mouth power plant projects in South Sumatra worth a combined $2 billion.

Mine-mouth power plants are normally built adjacent to a coal mine that is the source of its fuel, largely eliminating transportation costs.

PLN president director Nur Pamudji and HSBC Indonesia’s head of global banking Rajeev Babel signed the cooperation agreement in Jakarta on Tuesday. HSBC will assist PLN in preparing the legal, technical, economic and financial aspects of the development project.

The PLN chief hailed the agreement as an important milestone in the development of Indonesia’s power grid.

“The project will be carried out under the public-private partnership scheme at an estimated value of $2 billion,” he said.

PLN said HSBC’s involvement would make the project more marketable to potential investors. “HSBC will also assist PLN in ensuring a fair and transparent bidding process,” it said in a news release.

HSBC has appointed Aurecon, a Singapore-based engineering firm, as a technical adviser and Jakarta-based SMG Consultants as a coal mining adviser.

One plant will draw a 1,200 megawatt capacity from two 600 MW turbines. The other plant has a single turbine with a 600 MW capacity. Construction for both plants is expected to begin in 2014 and finish in 2017.

PLN plans to build several mine-mouth power plants in coal-rich South Sumatra.

PLN expects electricity demand to reach 328.3 terawatt hours in 2020, more than double last year’s 162.4 TWh. It has estimated that at least $60 billion is needed to fulfill that demand.